Paint stocks in focus; Asian Paints, Kansai Nerolac hit record high

Shares of paint manufacturers were trading higher in an otherwise weak market on expectation of healthy earnings growth for the quarter ended September 2016 (Q2FY17).

Asian Paints, Berger Paints India, Kansai Nerolac Paints and Shalimar Paints were trading higher between 1% and 4% on the BSE, as compared to 0.26% decline in S&P BSE Sensex at 12:11 pm.

Asian Paints (up 2.5% at Rs 1,222) and Kansai Nerolac Paints (up 7% at Rs 403) have hit their respective record highs in intra-day trade on Wednesday.

Asian Paints said its board will meet on October 25, 2016, while Kansai Nerolac Paints board will meet on October 28, to consider financial results for July-September quarter. Berger Paints India will declare Q2FY17 results on November 03, 2016.

These four paints companies had posted 25% year on year (YoY) growth in their aggregate net profit at Rs 800 crore for the quarter ended June 2016 (Q1FY17).

In past three months, all these stocks have outperformed the market by surging up to 45%, against 4% rise in the benchmark index.

Analyst at Prabhudas Lilladher expects the demand outlook for paint industry looks bright given normal monsoons, and expected impact of OROP and pay commission in 2HFY17 (October-March).

“We are increasing FY17 and FY18 EPS estimates of Asian Paints by 3.8?6.5% due to sustained gross margin expansion of 360 basis points (bps) in consolidated business, double digit volume growth in domestic decorative business in tough operating environment, gradual pick up in automotive and Industrial paints and improving demand outlook due to normal monsoons, pay commission bounty and OROP,” analyst said in Q1FY17 result update.

Religare Institutional Research expects, Asian Paints to report 26.5% YoY growth in net profit at Rs 505 crore for Q2FY17. The brokerage firm expects earnings before interest, tax, depreciation and amortization (EBITDA) margin improvement of 256 bps to 19% from 16.4% in a year ago quarter.

Company 05/07/2016 LTP % chg
Shalimar Paints 142.10 206.10 45.04
Berger Paints 201.43 267.00 32.55
Kansai Nerolac 312.50 386.45 23.66
Asian Paints 985.20 1216.00 23.43
Sensex 27166.87 28245.60 3.97
LTP : Last traded price on BSE in Rs at 12:47 pm


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